Ask The Experts: Minimum Number of Students for Profitability
A: It is best to assess your entire schedule when calculating profitability. We asked Jessica Scheitler, business coach and arts and entertainment accountant, to help us create a formula for this. According to Scheitler, it’s important to understand which costs directly affect the income you’re producing. In addition to direct expenses (the teacher’s salary, for example, or merchant fees from the credit card provider), each class needs to cover its share of your overhead (regular expenditures needed to keep your studio running, like rent, administration and supplies). To find out what this share is, divide the total amount of overhead costs by the number of classes you offer. Then, add that figure to the direct expenses to get your break-even point for that class. Now you can figure out how much to charge each student and how many must enroll to cover all expenses. Any enrollment above that number will be profit for your studio.
It is useful to note a minimum enrollment number on your website and in your teacher contracts. There may be exceptions, but with this formula, you can make an informed decision. For example, a small advanced class for your elite program may not be profitable according to this formula, but your large classes may offset the loss and justify running it. Overall profitability is your goal; when you take these considerations into account, you can make confident decisions about minimum enrollment for your studio.
Kathy Blake is the owner of Kathy Blake Dance Studios in Amherst, New Hampshire. She and Suzanne Blake Gerety are the co-founders of DanceStudioOwner.com.